The added value of the US in the USMCA

An analysis released by ECLAC highlighted the added value in exports of products from the United States within the framework of the Agreement between Mexico, the United States and Canada (USMCA).

To begin with, Mexico is the country in the region with the lowest share of domestic value added incorporated in exports, 64.5% (on average for the reference years, 2000-2014), compared to 88.2% in the United States and 73% in Canada.

Likewise, 65.1% of Mexican exports made in 2014, equivalent to 368,185 million dollars, correspond to domestic value added; 14.4% value added from the United States and 0.9% from Canada.

Another 17.1% is extraregional foreign added value and the rest corresponds to net taxes and transport margins (3.1% and -0.6%, respectively).

One more element that the analysis indicates is the greater share of US value added in exports from Mexico and Canada: in 2014 it represented 14.3% and 12% of intraregional shipments from those countries respectively.

These quotas contrast with the reduced participation of the Mexican and Canadian added value incorporated in the exports of the United States (1 and 1.9% in 2014, respectively).

The entry into force of the North American Free Trade Agreement (NAFTA), now USMCA, resulted in a significant increase in trade between the three countries.

USMCA

In recent years, a public debate has emerged about which country has benefited the most in commercial terms from the signing of such an agreement.

The objective of the ECLAC document is to examine trade between the members of the USMCA, measured in terms of added value.

This approach broadens those used in previous works, by considering the role of exports and imports at the same moment, which allows differentiating the balances of final goods and those of intermediate goods.

At the same time, a dynamic analysis is carried out covering a period of 15 years.

The estimates presented show a positive balance in favor of Mexico in terms of the growth of intra-regional exports in the period analyzed and a trade balance in surplus.

However, the value added analysis indicates that the bilateral trade deficit of Canada and the United States with Mexico is significantly reduced.

The United States is the USMCA country that incorporates the highest proportion of domestic value added in its exports.

On the other hand, the reduction in Mexico’s trade surplus, when measured in terms of added value, is explained by the positive balance of the United States in trade in intermediate goods with that country.

The lower deficit is also explained by the large profit margin that the United States obtains from trade in secondary activities, mainly computer and electronic products and machinery and equipment.

These estimates reflect the great benefits – in terms of job creation, integration of national companies and participation in highly complex technological activities – that the United States obtains from intraregional trade.